A consortium of mining companies on Wednesday unveiled a A$4.85
billion bid for the publicly owned coal rail track network in
Australia's Queensland state, in an attempt to prevent the network
being sold on the stock market as part of a broader
privatization.
The Queensland Coal Industry Rail Group, made up of 13 mining
companies including BHP Billiton Ltd. (BHP) and Rio Tinto Plc
(RTP), is pitching its offer as a superior alternative to the state
government's plans for a A$3 billion-plus initial public offer of
all of Queensland Rail's coal and freight assets.
Queensland Premier Anna Bligh said the government will look at
the proposal, which is conditional on due diligence.
"We aren't making any judgements about it until we've had a
really long opportunity to really examine the detail," Bligh said,
according to spokesman.
The coal producers first threatened to lodge a bid in March
after taking issue with the government's plan to offer the coal
tracks together with the haulage carriages in a vertically
integrated package. The coal producers argue vertical integration
would stifle both competition and extra investment in the track
network.
The state government, however, has said that a vertically
integrated network would operate more efficiently because there
would be a centralized approach to addressing logistical challenges
faced by running a complex rail network used by multiple parties.
The government must also consider how miners not in the consortium
might be impacted by their competitors owning the rail track
network, as well as the impact on non-mining users of the network
such as agricultural producers.
Queensland Treasurer Andrew Fraser said the government still
believes keeping the tracks and trains together is the best
outcome.
"We do believe that the decision that we've made about the
structure of QR into the future and the nature of the sale program
that we've decided upon is the right decision, but we will review
what's been put forward today," Fraser told journalists in
Brisbane.
The other coal producers that have signed up to provide equity
for the offer are Anglo American Plc (AAL.LN), Xstrata Plc
(XTA.LN), Ensham Resources, Felix Resources Ltd., Jellinbah
Resources, Macarthur Coal Ltd. (MCC.AU), Peabody Energy Corp.
(BTU), Vale S.A. (VALE), and Wesfarmers Ltd. (WES.AU).
QCIRG, which is chaired by former New South Wales state premier
Nick Greiner, said the consortium's offer is fully funded and
represents a substantial premium to what is likely to be achieved
via an IPO as well as to what has been paid in recent comparable
transactions.
"Importantly, our offer is able to be settled with the
government prior to the IPO and will not be dependent on volatile
equity markets, removing major risk for the state while also
providing early settlement," Greiner said in a statement.
The state government in March appointed five banks--Credit
Suisse, Goldman Sachs JBWere, Merrill Lynch, RBS Morgans and
UBS--to lead manage the IPO that is expected to be Australia's
largest this year.
Estimates of the value of the IPO range from A$3 billion to A$4
billion, with the government leaving the door open to retain some
of the business that had fixed assets valued at A$6.49 billion at
June 30.
Greiner said the mining companies, as the "natural buyers", are
able to pay more for the business, and would have more incentive to
invest in the infrastructure than the fund managers and individual
investors that would own the network after an IPO.
Greiner said that while due diligence is needed to "firm up" the
offer price, it can be assumed the final price will be around the
current level, and the consortium members believe they could
complete the offer in about three months.
The QCIRG offer excludes Queensland Rail's above-rail rolling
stock assets and its freight business.
The miners aren't the natural buyers of the above-rail assets
and will cooperate with the state government's plans to sell that
part of Queensland Rail, whichever way the government decides to
proceed, whether by IPO or trade sale, Greiner said.
Greiner said there are trade buyers who are interested in the
above-rail assets, while an IPO would also be successful.
He said the above-rail assets alone are likely to sell for more
than A$2 billion, adding to the A$4.85 billion the government would
receive under the miners' offer for the track network.
"If you put the two together, it is perfectly obvious they get a
better outcome in terms of cash now and in terms of cash in the
future under this proposal than they would under the IPO," Greiner
told journalists on a conference call.
QCIRG said Aquila Resources Ltd. (AQA.AU) and New Hope Corp.
(NHC.AU) are "supporting parties" to the offer and have the
opportunity to provide equity at a later stage.
Greiner said QCIRG has secured an acquisition facility of A$1.35
billion, which is underwritten by ANZ, BNP Paribas and Citibank
N.A., as well as a committed capex facility of more than A$2.05
billion to fund the current Queensland Rail capital plan and
"catch-up" maintenance.
The mining consortium is being advised by Citi.
-By Rebecca Thurlow, Dow Jones Newswires; 61-2-8272-4679;
rebecca.thurlow@dowjones.com
(Alex Wilson in Melbourne and Ross Kelly in Sydney contributed
to this article)
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